MONEY AND INFLATION IN YUGOSLAVIA

Yugoslav inflation unfolded as a classic wage-price-exchange rate spir al through the 1970s and 1980s, exploding into hyperinflation in the l ast quarter of 1989. Monetary accommodation of inflation, the behavior of demand for money, and the interaction between the two in Yugoslavi a are examined. The asset-liability structure of the central bank, tog ether with the policy stance on exchange and interest rates, led to a significant feedback from inflation to money supply. Despite their exp losive and seasonal nature, real money balances were cointegrated with other economic variables, and hence, in long-run equilibrium relation ship.